Correlation Between Lixte Biotechnology and Electromed

Can any of the company-specific risk be diversified away by investing in both Lixte Biotechnology and Electromed at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lixte Biotechnology and Electromed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lixte Biotechnology Holdings and Electromed, you can compare the effects of market volatilities on Lixte Biotechnology and Electromed and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lixte Biotechnology with a short position of Electromed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lixte Biotechnology and Electromed.

Diversification Opportunities for Lixte Biotechnology and Electromed

-0.58

Correlation Coefficient

Lixte Biotechnology  Electromed

Excellent diversification

The 3 months correlation between Lixte and Electromed is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lixte Biotechnology Holdings and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Lixte Biotechnology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lixte Biotechnology Holdings are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Lixte Biotechnology i.e., Lixte Biotechnology and Electromed go up and down completely randomly.

Pair Corralation between Lixte Biotechnology and Electromed

Assuming the 90 days horizon Lixte Biotechnology Holdings is expected to generate 5.19 times more return on investment than Electromed. However, Lixte Biotechnology is 5.19 times more volatile than Electromed. It trades about 0.11 of its potential returns per unit of risk. Electromed is currently generating about -0.04 per unit of risk. If you would invest  4.40  in Lixte Biotechnology Holdings on March 13, 2024 and sell it today you would earn a total of  2.50  from holding Lixte Biotechnology Holdings or generate 56.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lixte Biotechnology Holdings  vs.  Electromed

Lixte Biotechnology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixte Biotechnology Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lixte Biotechnology showed solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electromed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Lixte Biotechnology and Electromed

The main advantage of trading using opposite Lixte Biotechnology and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lixte Biotechnology position performs unexpectedly, Electromed can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Electromed will offset losses from the drop in Electromed's long position.

The idea behind Lixte Biotechnology Holdings and Electromed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.